After six-month lull, CapEx jumps to $31 billion in Q3, Synergy Research says
Hyperscale data center operators like Amazon, Google, and Microsoft are beginning to spend money again, according to analysts with Synergy Research Group, which is good news for vendors and channel players that have a stake in data center hardware or the cloud.
The Lowdown: After slow capital expenditure spending during the first six months of the year, the major cloud companies spent more than $31 billion in the third quarter, a year-over-year increase of 8%, the market research firm said in a report this month. With the boost, the CapEx pace in 2019 is now ahead of that of 2018, which was a record-setting year.
The Details: A good chunk of the money the hyperscalers are spending is going to building, growing, and equipping their massive data centers, a number that now sits at 504, triple the number since the beginning of 2013. All the hyperscalers are heavily reliant on the cloud for their operations, which is driving the need for more data center space and operations, and continued strong revenue growth is enabling them to make the investment.
The top five spenders in the third quarter were Amazon, Google, Microsoft, Facebook, and Apple, and with the exception of Apple, the other four saw significant year-over-year jumps in CapEx spending, according to Synergy Research. The other top hyperscale spenders were IBM, JD.com, Oracle, and Chinese companies Alibaba, Tencent, and Baidu.
The data was based on an analysis of both the CapEx and data center footprint of 20 of the world’s top cloud and Internet service providers, including the largest players in search, social networking, e-commerce, and Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS), and Software-as-a-Service (SaaS).
The Impact: Spending by these hyperscalers is increasingly important to any vendor or partner that sells data center hardware or has clients with growing cloud-based strategies. Cloud service providers and cloud-based companies are becoming the key drivers of hardware sales, and Gartner last month noted that worldwide public cloud revenue will grow 17% in 2020, to $266.4 billion, adding that cloud adoption among organizations is now mainstream. In October, Synergy Research reported that the top four public cloud providers – Amazon, Microsoft, Google, and Alibaba – accounted for 72% of the third-quarter worldwide IaaS and PaaS market.
The Buzz: “As expected, there was a significant boost in CapEx in the third quarter, after a couple of quarters that were relatively soft in comparison with the lofty heights achieved in 2018,” said John Dinsdale, chief analyst at Synergy Research. “Hyperscale companies are in growth mode and revenue growth rates remain in strong double-digit territory, with aggregated Q3 revenue up 14% over 2018. Amazon, Google, Facebook, and Alibaba are all growing much more rapidly than that. These expanding companies are highly reliant on bigger and better data center operations, which will drive continued growth in CapEx levels.”